Managing your debt on a home
About the article
This is a digitised version of an article from The Cayman Compass's print archive. Occasionally, the digitisation process introduces transcription errors, or other problems.
See the article in its original context from June 1998.
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Most people feel that owning a home is investing in your future. In fact, owning a home presents a great opportunity for an individual to diversify his or her investment portfolio.
In building wealth and maximising net worth, your debts are as important as your assets. To wisely manage your debt, you should monitor your loans closely to minimise interest costs and maximise your net worth. Owning a home involves more than just simply taking out a 20-year mortgage, then relaxing while your assets appreciates and you pay down the balance. Managing your debt like you manage your securities portfolio can save you thousands of dollars over the life of your mortgage.
As everyone knows, the economy is booming, and returns on investments have been very high. As well, the prime lending rate has been stable for more than a year now, and forecasters are predicting this to continue. Making a home or rental investment purchase can provide great diversification in your investment portfolio. In order to provide the greatest flexibility, look for a mortgage which offers low setup costs, competitive interest rates, and allows you, the investor, to pay some or all of your mortgage at any time without any penalties.
If you are considering purchasing a property on the island as a primary or secondary residence, and you plan on paying down a considerable portion of your mortgage debt in the near future, plan on making extra lump-sum payments or simply adding a few hundred dollars a month to your regular payment. This flexibility can save you a substantial amount of money on interest costs, and allow you to substantially reduce your mortgage principal, and build equity faster.
As an example, a lump-sum payment of even $10,000 a year can make a substantial difference in the amount of time it takes to pay off your mortgage and in the interest you will pay over the amortisation period of the loan.
Consider a $300,000 mortgage at 10.50 percent (see chart). For further information, contact Trina Stevens at Cayman National Mortgage Fund Ltd. at 949-0445 or after hours at 914-7473.
Trina Stevens is the development and administration officer for Cayman National Mortgage Fund Ltd.
